Asian markets pull back as Fed officials fear rate hike

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(AFP)

HONG KONG — Asian markets fell on Friday as a string of senior Federal Reserve officials made the case for tackling inflation, raising fears the bank could embark on an aggressive campaign that could see four hikes interest rate this year.

Fed Chief Jerome Powell’s promise this week to rein in soaring prices while promoting recovery in the world’s largest economy gave a much-needed boost to investor sentiment and helped propel a rally in stocks. shares.

Data showing that US inflation appeared to be stabilizing added to the positivity and tempered fears over the end of ultra-loose monetary policies, which were key to a nearly two-year market rally and a global economic rebound.

But the mood darkened on Thursday after comments from officials.

Lael Brainard, during her Senate hearing to become Powell’s deputy, said rates could rise as early as March, a move backed by Philadelphia Fed Bank chief Patrick Harker, who also raised the possibility of three more before the end of the year.

Chicago and St Louis Fed chiefs saw a similar number of increases, while Atlanta’s Raphael Bostic said he was open to a move in March.

Minutes from the bank’s December policy meeting showed officials were keen to move quickly to rein in prices and accelerate the reduction of its massive bond-buying program, then begin offloading its Treasury holdings – measures that have been used to keep rates low all the time.

“A recent chorus of Fed speakers…said they were open to an interest rate hike in March, which means the possibility of four rate hikes this year is growing,” said Edward Moya of ‘OANDA.

“With four (board) voters now expecting a hike in March, financial markets cannot rule out that they could come up with five rate hikes this year.”

“Ripe for more fluctuation”

The Nasdaq led steep losses on Wall Street, falling more than 2% as technology companies were more sensitive to higher borrowing costs.

And sales continued in Asia, with Tokyo down more than 2%, while Sydney and Seoul were down more than 1% each.

Hong Kong was well down, having seen a strong recovery this week as tech companies there came under pressure. Shanghai, Wellington, Taipei, Manila and Jakarta were also in the red. Singapore bucked the upward trend.

“We’re in a position where a lot of what’s been positive for equities is maybe turning neutral or negative,” said Sarah Hunt of Alpine Woods Capital Investors.

“And while there are still few alternatives, that makes the equity market ripe for more swings over the next few months as we see how the data is collapsing and how the Fed is reacting.”

The impact of soaring prices on businesses was clearly highlighted in a Conference Board survey on Thursday, with business leaders saying they were the second biggest concern, behind labor shortages .

Still, market strategist Louis Navellier remained optimistic, saying: “An early (economic) reopening will present fairly predictable opportunities for recovery.

“Expect some short-term volatility as we navigate the end of the pandemic and begin to feel the Fed’s cut and use the pullbacks as a buying opportunity to position ourselves for a strong recovery. in spring.”

Key figures around 02:30 GMT

Tokyo – Nikkei 225: 1.9% lower at 27,945.70 (pause)

Hong Kong – Hang Seng Index: DOWN 0.6% to 24,280.07

Shanghai – Composite: 0.3% down to 3,543.88%

Dollar/yen: DOWN to 113.77 yen against 114.16 yen on Thursday evening

Euro/dollar: DOWN to $1.1466 vs. $1.1469

Pound/dollar: UP to $1.3722 from $1.3704

Euro/pound: UP at 83.56 pence against 83.50 pence

West Texas Intermediate: 0.6% drop to $81.45 a barrel

North Sea Brent: 0.4% down to $84.16 a barrel

New York – DOW: DOWN 0.5% to 36,113.62 (closing)

London – FTSE 100: UP 0.2% to 7,563.85 (closing)

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